The Industrial Revolution in the USA
The word “revolution” implies a rapid change and is usually used to describe a political
event like the American or the French Revolutions. The term also can be used to describe
an economic change. In an “industrial revolution,” there is a rapid change from a society
in which most people live on farms to one where most people live in towns or cities. For
example, when George Washington was president, nine out of ten Americans made their
living by planting and harvesting; today, fewer than three out of 100 people live on
farms.
Sometime during the years between 1800 and 1920, the U.S. experienced an industrial
revolution that caused many changes in the ways people thought, spent their free time,
dressed, traveled, talked to one another, and earned their living. It is difficult to point out
the exact years in which these changes took place. Most historians, however, would agree
that the smaller changes occurred slowly during the 1790s, picked up during the years
before the Civil War, and gathered speed after the war. By 1920, the U.S. had completed
its change from a nation of farmers to an industrialized society.
England was the first country to industrialize, but France and Germany soon followed.
Across the Atlantic Ocean, the United States was also beginning to industrialize. Always
rich in natural resources, the former British colonies possessed a huge supply of fertile
land. Dense forests throughout the country supplied wood for building and heating. In the
Northeast, many swift rivers provided the power to turn water wheels. Huge deposits of
coal were discovered in the Allegheny Mountains around the time of the Civil War. The
Mesabi Mountain Range in Minnesota provided the ore needed to make iron and steel.
Rich deposits of copper were found in the West. Reserves of crude oil were discovered in
Pennsylvania and Ohio, and when these ran out, new ones were found in Oklahoma and
Texas.
Although many of the machines needed for industrialization were devised in England, it
was not long before Americans added to the world’s list of important inventions. Eli
Whitney made a machine that separated cotton fiber from cotton seeds at a rate 50 times
faster than it took one man to clean a pound of cotton. Years later Whitney was able to
demonstrate the principle of making interchangeable parts. He showed a government
committee how each of the different parts of a rifle –the stocks, triggers, rifle barrels,
etc.- could be made exactly alike. Even a worker with no training could pick any part
from a series of piles and assemble them into a working gun.
James Watt, a Scot, is credited with inventing the steam engine that was first used in
factories in England. Robert Fuller, an American, revolutionized water transportation by
attaching a steam engine to paddlewheels and was able to send ships “steaming” up
America’s rivers. Not long afterwards, Watt’s basic invention was mounted on wheels,
creating the first American railroad. The Baltimore and Ohio started in 1828, at about the
same time that the British began building their first railroad. Many minor inventions were
needed to make the railroad safe and efficient, including the cowcatcher, which swept
animals off the track, and George Westinghouse’s air brakes. Railroad mileage in the
U.S. expanded quickly in the 1840s and reached 30,000 miles by 1860.
Many other American inventors contributed to the industrialization of the U.S. as well as
Western Europe. Elias Howe invented the sewing machine in 1846 and Isaac Singer
perfected it. An African American by the name of Jan Matzelinger made a machine that
could sew the sole to the top of the shoe. Samuel Morris’s telegraph used a series of dots
and dashes to sent messages along lines across the country. Colt invented a revolver that
fired bullets in a matter of seconds. In 1839, Charles Goodyear turned spongy rubber into
hardened surfaces by a process called vulcanization. In the 1850s, William Kelly
invented a process for turning iron into steel. By 1860, the U.S. Patent Office had granted
36,000 applications, and 30 years later, 440,000 patents had been issued.
The workforce for America’s Industrial Revolution came from two sources. First,
inventions such as the mechanical reaper meant that machines could do much of the work
on farms that people used to do. With less labor needed to run farms, hundreds of
thousands of people decided to move to the city, where they found jobs in the new
factories and offices built during this industrial age. Women found work as typists,
salespersons, and clerks, as well as in teaching, cleaning, and nursing. By 1900, there
were a total of 5 million women working outside of the home, representing 17% of the
work force. Their pay was barely half the amount paid to men. Over 1.7 million children
under 16 years of age had also entered the workforce by 1900 and were paid even less
than women.
Meanwhile, millions of immigrants left England, Germany, Italy, Poland, Romania,
Russia, Greece, and dozens of other countries and came to the United Sates, where they
hoped to find jobs created by the Industrial Revolution.
The infrastructure that included a system of transportation was also constructed during
the Industrial Revolution. By the time of the Civil War, there were nearly 30,000 miles of
railroads spanning America. This was just the start. Another 200,000 miles of railroads
were built between 1865 and 1910. Steel rails covered the country, connecting East to
West, North to South, and all regions in between. Certain captains of industry, like
Cornelius Vanderbilt and James J. Hill, played leading roles in this feat. The most notable
accomplishment was completing the transcontinental railroad in 1869. The occasion was
celebrated by hammering the famous golden spike into the ground where track coming
from the east met track coming from the west. Millions of dollars and over 400,000,000
acres of land were granted to the corporations that built these railroads. Built in a hurry,
the railroad track needed was often torn up later and replaced in order to make travel
safer.
Then of course there was money. The American Industrial Revolution was financed by
two sources: first, profits from previous commerce, such as New England’s famous
“China trade” of the 1840s and later from the profits made by industrialists like Andrew
Carnegie and John D. Rockefeller; second, from investors from foreign countries,
particularly the British. Foreigners invested over 500,000,000 dollars in American
businesses before the Civil War. America’s stable society and rule of law, in addition to
an ever-expanding economy, gave investors a reasonable chance of large profits.
The Industrial Revolution in the U.S. may never have occurred without the contributions
of a small group of talented and hardworking men. They applied their intelligence,
daring, energy, and special skills to making money by creating huge industrial empires.
Their contributions had both positive and negative effects.
Entrepreneurs:
Cornelius Vanderbilt (1794-1877): With a $100 loan from his father, Vanderbilt began
his business career by opening a local ferry service. He repaid his dad tenfold within a
year. Known for his confession “I have been insane on the subject of making money all
my life,” Vanderbilt started in earnest by running sailboats along the Hudson River
before moving up to the paddlewheel steamer. His bold business practices soon put
Robert Fulton out of business and allowed him to capture the Hudson River trade halfway
up to Albany. Vanderbilt then switched to the profitable coastal trade between New York
and New England, and in the 1850s he ran ships to Nicaragua to make money on the gold
rush. At the age of 70, Vanderbilt switched to building and buying railroads. He gained
control of the New York Central Railroad, extended its reaches to Chicago, and built
Grand Central Station in New York City.
Andrew Carnegie (1835-1919): Carnegie’s family left their native Scotland when
Andrew was 13. He soon went to work in a cotton mill, taught himself to read, and
continued to educate himself all of his life. He held a number of different jobs before
learning Morse code and finding work as private secretary to Tom Scott, director of the
Pennsylvania Railroad’s western division. After making several shrewd investments,
Carnegie entered the iron and steel-making business at the age of 26. He started his own
company four years later. By introducing new technology, cutting costs, making careful
purchases, hiring capable assistants, and using convincing salesmanship, Carnegie was
able to control one-fourth of the U.S. steel-making capacity. He sold his company for
$700,000,000 (over $10 billion in year 2008 dollars) to JP Morgan, who combined it with
other companies in 1901 to form U.S. Steel, which was valued at $1.4 billion. Believing
it was wrong for a person to die rich, Carnegie devoted the rest of his life and much of his
fortune to making charitable contributions which included many libraries.
John Pierpont (JP) Morgan (1837-1913): J.P. Morgan played a leading role in his father’s
investment firm before taking full control in 1890. He quickly became the world’s most
influential banker. He lent money to Thomas Edison, bought out Andrew Carnegie to
form the world’s first billion-dollar corporation, financed dozens of railroad mergers, and
controlled numerous banks, mines, and insurance companies. He even lent money to the
U.S. government at a considerable personal profit in order to maintain the gold standard.
He used his own money to support the stock market in 1907. His money helped big
businesses control entire industries by buying out smaller companies. Morgan, however,
always claimed that being honest and trustworthy were the reasons for his success. (Chart
A)
The Theories of Laissez-Faire and Survival of the Fittest
Beginning with Alexander Hamilton’s proposals for a federal bank, a protective tariff,
and government-financed internal improvements, the U.S. government played an
important part in encouraging industrial development. However, the real assistance for
industrial growth came after the Civil War, when the North managed to get high
protective tariffs to shield American businesses from foreign competition. An open
immigration policy guaranteed a plentiful supply of people willing to work for long hours
at low wages. The national government, as well as state and local ones, discouraged and
often suppressed strikes by workers seeking higher wages. A sound money policy
encouraged creditors to lend money because they would be repaid with dollars worth as
much or more than the dollars they lent. The government gave millions of dollars and
acres of land to corporations in order to get them to lay more railroad track to connect
and bring the different regions of the country closer.
Another important government policy regarding businesses was to leave them alone and
unregulated. That way businessmen did not have to worry about government interfering
with their activities, and they had the freedom to make money in any way they could.
This policy was based on a belief in “laissez-faire” and “survival of the fittest.”
The words “laissez-faire” are an abbreviation of a phrase that originally read, “don’t
interfere; the world will take care of itself.” This advice was directed at the French
government well over 250 years ago. At that time, there were laws dealing with nearly
every aspect of business: for example, tanners could be told when they could slaughter
their cattle, and weavers were told how many strands of thread must be woven into each
square inch of cloth. Those who broke the rules could be prevented from staying in
business; if they continued to break them; they could lose a finger, hand, or even an arm.
The businessmen of France felt that they would be much better off if left alone and were
free of rules they thought were ridiculous. Philosophers who agreed began to write essays
that called for “laissez-faire,” but it was a Scotsman, Adam Smith, who made the idea
famous. In his book, The Wealth of Nations, he argued that all limits on business should
be removed. One of the most important ideas in Adam Smith’s book was the idea of the
“invisible hand.” Smith believed that some invisible force would always guide the selfish
acts of individuals and ultimately help the country. He urged trust in the invisible hand
and not in the government.
The philosophy of laissez-faire was given unexpected support from a famous English
scientist, Charles Darwin. Darwin’s book, The Origins of the Species, appeared in 1859.
It made quite a stir because it argued that humans were a branch of species that had
evolved from primates. He claimed evolution worked because more animals in any
species are born than can possibly survive. Only those whose particular features allowed
them to adapt to their environments lived long enough to produce off-spring. These offsprings will probably inherit the characteristics that made their parents more fit. Charles
Darwin never intended to apply his theory of evolution by “natural selection” to human
society. Others, however, could not resist. Philosophers rather than scientists adopted the
theory of natural selection and survival of the fittest to explain social relations. These
men were called Social Darwinists, and their philosophy was called Social Darwinism.
William Graham Sumner, who became America’s leading philosopher of Social
Darwinism, argued: “Competition, therefore, is a law of nature. Nature is entirely neutral.
She gives her rewards to the fittest. Men get from nature just what they deserve; what
they have and enjoy is always a result of what they can and do. This is the system of
nature. If we do not like it and try to change it, there is only one way we can do it. We
can take from the better and give to the worse. We can give the rewards to those who
have failed in life. This might lessen the inequalities. But, it shall favor the survival of the
less fit, and shall be accomplished by destroying liberty, and this would be foolish.”
Successful businessmen quite naturally were attracted to the philosophy of laissez-faire
and survival of the fittest. They say they won success in business as a result of the laws of
nature. Businesses destroyed in competition and men unable to support their families
were considered as unfit for survival as the short-necked giraffe. Helpings losers instead
of rewarding winners, according to Social Darwinists, would only encourage the lazy and
continue the traits that did not equip people for survival. Thus, government help-no
matter how well intended-would only weaken society.
One of the early critics of the philosophy of Social Darwinism was Henry Demarest
Lloyd, author of Wealth against Commonwealth. Writing in 1894, Lloyd claimed that:
“There is no other field of human associations in which any such rule of action as
Survival of the Fittest is allowed. The man who should apply in his family or his
citizenship this “survival of the fittest” theory as it is practically professed and operated
in business would be a monster, and would be speedily be made extinct, as we do with
monsters. To divide the supply of food between himself and his children according to
their relative powers…to follow his conception (idea) of his own self-interest in any
manner which the self-interest of all had taken charge of…would be a short road to the
penitentiary or the gallows…In trade business men have not yet risen to the level of the
family life of the animals. The true law of business is that all must pursue the interest of
all. In the law, the highest product of civilization, this has long been a commonplace. The
safety of the people is the supreme law.” Lloyd also argued, “…our industries, from
railroads to workingmen are being organized to prevent milk, nails, lumber, freights,
labor, soothing syrup, and all other things from becoming too cheap. The majority have
never yet been able to buy enough of anything. The minority have too much of
everything to sell…Society is letting these combinations become institutions without
compelling them to adjust their charges to the cost of production, which used to be the
universal rule of price.”
The ideas preached by Adam Smith, William Graham Sumner, and John Rockefeller
could be backed with some important statistics. During the great age of laissez-faire,
between 1860 and 1915, production in the United States increased 1200 percent. During
this period, America moved from a second-rate industrial power, behind England and
France, to the world’s leading economic giant. By 1915, America produced more than
one-third of the world’s steel and built almost one-half of its railroads. Entrepreneurs
made fortunes in oil, steel, meatpacking, shoemaking, and hundreds of other industries.
Businessmen who had started with hardly a penny rose to command industrial empires
richer than many companies. Poor peddlers became millionaires, hardworking
immigrants made fortunes, workers rose to become bosses, and the sons of peasant
farmers became the fathers of successful lawyers, doctors, salesmen, and accountants.
Success, however, was not uniform. While some millionaires spent fortunes in wild
displays of their wealth, millions went to bed hungry every night. Many thousands were
killed or seriously injured in industrial accidents. Farmers were driven off their lands,
immigrants were unable to get jobs, residents of cities could not educate their children,
and youngsters aged 10 and 11 were forced to work for a few cents per hour. Forests
were stripped, waters polluted, and natural resources were wasted and depleted.
Politicians were bribed, workers were underpaid, and the standard of living for the
average family hardly improved.
Those who did not profit from laissez-faire-the so-called “unfit,” as well as socially
conscious members of the middle class, including clergymen, teachers, lawyers, and even
a number of businessmen-did not agree with this philosophy. They eventually applied
enough pressure to introduce government regulation of business to protect the
unfortunate. (Questions and chart B)
The Gospel of Wealth
With a fortune rivaling John D. Rockefeller’s, steel magnate Andrew Carnegie embraced
a belief in survival of the fittest. However, he was not satisfied with merely accumulating
money-he felt it was the duty of the man who created wealth to share the rewards of his
hard work and shrewd business practices. In a well-known essay, The Gospel of Wealth,
Carnegie explained his philosophy. (Ask yourself whether the responsible redistribution
of personal wealth is a good substitute for measures such as a graduated income tax, laws
requiring payment of a living wage, unemployment insurance, and public housing.)
Competition is best: “The price which society pays for the law of competition, like the
price it pays for cheap comforts and luxuries, is also great; but the advantages of this law
are also greater still, for it is to this law that we owe our wonderful material development,
which brings improved conditions in its train. But, whether the law be benign or not, we
must say of it, as we say of the change in the conditions of men to which we have
referred: It is here; we cannot evade it; no substitutes for it have been found; and while
the law may be sometimes hard for the individual, it is best for the race, because it
insures the survival of the fittest in every department. We accept and welcome, therefore,
as conditions to which we must accommodate ourselves, great inequality of environment,
the concentration of business, industrial and commercial, in the hands of the few, and the
law of competition between these, as being not only beneficial, but essential for the future
progress of the race.”
Avoid Socialism. “The Socialist or Anarchist who seeks to overturn present conditions is
to be regarded as attacking the foundation upon which civilization itself rests, for the
civilization took its start from the day that the capable, industrious workman said to his
incompetent and lazy fellow, ‘If thou dost not sow, thou shalt not reap,’ and thus ended
primitive Communism by separating the drones from the bees… To those who propose to
substitute Communism for this intense Individualism the answer, therefore, is: The race
has tried that. All progress from that barbarous day to the present time has resulted from
its displacement. Not evil, but good, has come to the race from the accumulation of
wealth by those who have the ability and energy that produce it. Our duty is with what is
practicable now; with the next stop possible in our day and generation. It is criminal to
waste our energies in endeavoring to uproot, when all we can profitably or possibly
accomplish is to bend the universal tree of humanity a little in the direction most
favorable to the production of good fruit under existing circumstances…”
No charity: “One of the serious obstacles to the improvement of our race is
indiscriminate charity…Of every thousand dollars spent in so called charity today, it is
probable that $950 is unwisely spent; so spent, indeed, as to produce the very evils which
it proposed to mitigate or cure. A well-known writer of philosophic books admitted the
other day that he had given a quarter of a dollar to a man who approached him as he was
coming to visit the house of his friend. He knew nothing of the habits of this beggar;
knew not the use that would be made of this money, although he had every reason to
suspect that it would be spent improperly…The quarter-dollar given that night will
probably work more injury than all the money which its thoughtless donor will ever be
able to give in true charity will do good.”
Duty of the man of wealth: “Poor and restricted are our opportunities in this life; narrow
our horizon; our best work most imperfect; but rich men should be thankful for one
inestimable boon. They have it in their power during their lives to busy themselves in
organizing benefactions from which the masses of their fellows will derive lasting
advantage, and thus dignify their own lives. This, then, is held to be the duty of the man
of Wealth: First: to set an example of modest, unostentatious living, shunning display of
extravagance; to provide moderately for the legitimate wants of those dependent upon
him; and after doing so to consider all surplus revenues which come to him simply as
trust funds, which he is called upon to administer, and strictly bound as a matter of duty
to administer in such a manner which, in his judgment, is best calculated to produce the
most beneficial results for the community—the man of wealth thus becoming the mere
agent and trustee for his poorer brethren, bringing to their service his superior wisdom,
experience, and ability to administer, doing for them better than they would or could do
for themselves.” (Write a paragraph explaining why you do or do not agree with
Carnegie. Address whether that the responsible redistribution of personal wealth is more
productive than charity or some form of legislation that helps the poor.)
Rockefeller and Standard Oil
In the 1840s, ships from New England sailed the oceans for years at a time searching for
whales. Blubber taken from these giant creatures provided the oil used to light millions of
homes. However, these long voyages came to an end when a Canadian discovered that a
black liquid that oozed up to the earth’s surface could be refined into kerosene, which
would eventually replace whale oil. As a result, the search for whales was rapidly
replaced by a search for oil.
Oil had often been found leaking into farmers’ fields in the western parts of
Pennsylvania. In August 1859, Colonel Edwin Drake became the first person to drill for
and strike oil. Drake was eventually able to extract, store, and sell some $500 worth of
the black gold every day, an amount equal to the average man’s yearly salary. Drake’s
success led to an oil boom in Pennsylvania just ten years after gold was discovered in
California. The Civil War, which lasted from 1861 to 1865, did not interrupt this oil
boom. Attracted by stories of easy riches, hundreds of men flocked into the western parts
of Pennsylvania to seek their fortune.
As hundreds of prospectors swarmed into Pennsylvania, a state of lawlessness prevailed
and shady practices became common. Shrewd farmers charged thousands of dollars for
the privilege of drilling wells on their land. Some filled empty holes with oil and sold
them as good wells. Men drilled at an angle in order to draw oil from underground pools
beneath their neighbors’ property. Teamsters charged hundreds of dollars to haul heavy
barrels of oil to the railroads. When pipelines were constructed during the day to reduce
transportation costs, teamsters tore them up at night. Soon, armed guards were hired to
protect private property. The price of oil rose and fell. A 42-gallon barrel of oil once sold
for $20; two years later, the same barrel sold for $12.00, and six months later for 10
cents. When prices fell, hundreds of prospectors were forced out of business. Those still
in business made quick fortunes when prices recovered.
John D. Rockefeller’s success in business made him the richest man in America. He was
born in 1839, the son of a religious woman who attended church every Sunday and
insisted her children do the same. His father was a cheerful bigamist who lived by his
wits and had children with different women. A jovial and charming man, he disappeared
from his family’s home for months at a time. Bill Rockefeller supported his family by
earning enough money in such questionable ways as selling mineral water to cure cancer.
The father sharpened his sons’ wits by lending them money at 10 percent interest. He
enjoyed cheating them and taught them to trust no one, not even him. John had hoped to
become a minister, but the family did not have the money to send him to college; so, he
stopped attending school when he was 16. He went to work as a bookkeeper for $25 a
month and began making donations to the church that he attended regularly. While still a
young man, Rockefeller taught Sunday school, gave one-tenth of his salary to religious
causes, and saved as much as he could. Over his lifetime, Rockefeller became the richest
man in America, gave away $530 million and at one time was worth $900 million.
In the same year that Colonel Drake drilled his first oil well, John D. Rockefeller and a
partner began buying and selling farm products. Rockefeller avoided serving in the U.S.
army during the Civil War by paying someone $300 to take his place. Instead of
soldiering, Rockefeller and a partner made a small fortune selling flour to the Union
army. By 1863, he was ready to go into a new business. After careful investigation, he
decided to start refining crude oil into kerosene that people could use to burn in their
lamps and stoves. At that time, unrefined oil was selling at 40 cents a 43-gallon barrel,
but kerosene was sold for 40 cents a gallon. Rockefeller thought that he could make his
fortune by refining the crude oil into kerosene.
He decided that his business would not be a shoestring operation and planned to build an
efficient and modern factory equipped with the best machinery money could buy. He cut
expenses in every way possible. Rather than buy oil barrels at high prices, he hired
workmen to make them. Rather than buy the wood needed to make the barrels, he bought
an entire forest. When he learned the cost of hauling green wood into his barrel-making
shop, he built kilns to dry the wood and make it easier to transport. Rockefeller himself
arrived at his shop at 6:30 every workday morning to supervise his workers. To speed up
production, he did as much of the heavy lifting as was needed. He took great pains to see
that there was no waste. No detail was too small to escape his sharp eyes. Savings of only
a few cents per barrel could eventually be translated into thousands of dollars in profits.
His care and shrewdness soon paid off. In 1865, he was able to buy out one of his
partners for $72,000. Five years later, together with his brother William and two other
partners, he formed a corporation called Standard Oil. It was worth $1 million at the time
of its founding and was later reorganized as Eastern Seaboard Standard Oil (Esso).
Today, it is known as Exxon Mobile and its profits in 2005 set a world record of $36.1
billion. (Questions C)
At first, Rockefeller and his partners concentrated in refining oil in Cleveland. Then, in
conjunction with Tom Scott, the president of Pennsylvania Railroad, he came up with a
plan to combine the city’s largest refineries under the control of one company-theirs.
They formed a new corporation, the South Improvement Company, by combining 13
different refineries and issuing 2000 shares of stock. Along with his partners, Rockefeller
bought 900 shares, giving Standard Oil a controlling interest in the Company. The South
Improvement Company directors knew that there were three railroads running from
Cleveland to New York City: the Erie, the Central, and the Pennsylvania. They also knew
that these railroads were hurting themselves by competing with one another to carry oil to
New York. Under Rockefeller’s leadership, the SIC made an agreement with the
railroads. It guaranteed the railroads regular business, an end to competition between
them, and a supply of railroad cars and loading docks. In exchange, the railroads would
give the SIC special low prices and secret information on the plans of other refineries.
 The official rate per barrel of oil shipped from Cleveland to New York City would
be $2.56.
 The Erie, Central, and Pennsylvania Railroads, however, would pay the SIC a
rebate (refund) of $1.06 for every barrel of oil they shipped.
 In addition, the three railroads would pay SIC a drawback (someone else’s rebate)
of $1.06 for every barrel of oil shipped by refiners not part of the SIC deal.
 The three railroads would also supply SIC with detailed information on the
customers, destinations, prices, and delivery dates of oil shipped by Rockefeller’s
competitors.
 The SIC would divide all of its shipments among the three railroads and give
them a regular amount of business each month.
 The SIC promised to provide loading platforms for the oil, as well as insurance,
railroad tank cars, and barrels as needed.
 The terms of this deal would remain secret.
With a copy of his deal in hand, Rockefeller and his partners paid calls to the refineries
that were not a part of the SIC. They told them that they could continue to compete with
Standard Oil if they wished, but that Standard Oil had a special arrangement with the
railroads that effectively shut them out. Rockefeller and his partners offered to buy
refineries for about 45 percent of what their owners thought they were worth. They said
that they would not pay more than the value of the company to Standard Oil, and that
they would pay with Standard Oil stock or with cash. In less than a year, all of the
independent refineries in the Cleveland area had either sold out to Rockefeller or gone
out of business. Many believed they had no choice. Rockefeller justified this when he
said, “Because the Standard Oil Company was located in Cleveland, Ohio, it could use
any of three railroads. I took advantage of that situation and made the best possible deal
for Standard. Other companies tried to do the same thing. Standard Oil was always able
to offer the railroad many cost reducing savings. It offered to provide loading platforms,
and freight in large carloads and trainloads. It provided regular business which allowed
the railroads to use its own hauling capacities to its best advantage and not have to wait
until the refinery was ready. Standard carried its own insurance and saved the railroads
from paying for losses caused by theft or fire. For these many services the Standard Oil
Company received some special favors. But even so, the railroads made much more
money in their dealings with Standard Oil than by the smaller and irregular traffic from
other companies that might have paid the higher rate.” (Questions D)
Robber Baron or Industrial Statesman?
Many years ago, the term “robber baron” was applied to German lords who forcibly
collected money from every ship passing their castles on the Rhine River. The same term
was later used to describe the captains of industry in America who were said to rob
consumers by controlling the “rivers of trade.” As one of the most powerful and wealthy
businessmen whose kerosene was used in practically every American home, Rockefeller
often invited comparison to the German robber barons. However, many people would
disagree with this unfavorable description of the oil tycoon. Rather than curse him as a
pirate who drank deeply from the waters of trade, admirers believe he was a great
businessman who eliminated wasteful competition and sold an excellent product at a
reasonable rate-someone they would call an “industrial statesman.”
For twenty years, George Rice attempted to stay in the refining business, despite what he
claimed was a determined effort by Rockefeller to wipe him out. In 1899, Rice was called
to testify before the United States Industrial Commission. In his testimony, he said, “I
have been refining oil for 20 years. My business has been shut down for three years now;
due to the methods that Standard Oil used…Stand Oil Trust could cut customer’s prices
temporarily and sell to them below their costs. This they could easily do, and thus
effectively wipe out all competition. Standard Oils’ prices were generally so high that I
could sell my goods at a 2 to 3 cents a gallon below their prices and make a nice profit.
But, I could not match their price cutting on my consumers’ goods…I have been
driven…from one railroad line to another, in a vain attempt to get fair railroad rates with
the Standard Oil Trust, which I have been utterly unable to do. Consequently, I had to
shut down with my business absolutely ruined and my refinery idle…But, do not accept
my word. Allow me to read to you from a Federal court’s decision, Judge Baxter
presiding: ‘It appears that the Standard Oil Company and George Rice were competitors
in the business of refining oil in the neighborhood of Macksburg, Ohio, and each equally
dependant on the same railroad. It further appears that Standard wished to crush Rice and
his business. Under the threat of building a pipeline to carry its oil, Standard was able to
force the railroad to charge Rice 35 cents a barrel and Standard only 10 cents. In addition,
the railroad had to pay standard a drawback of 25 cents a barrel for every barrel shipped
by Rice.’ ”
When Rockefeller was asked, “To what advantage, or favors, or methods of management
do you ascribe chiefly the success of the Standard Oil Company?”; he said, “I ascribe the
success of the Standard to its consistent policy to make the volume of its business large
through the merits and cheapness of its products. It has spared no expense in finding and
using the best and cheapest methods of manufacturing. It has sought for the best
superintendents and workmen and paid the best wages. It has not hesitated to sacrifice old
machinery and old plants for new and better ones. It has placed manufacturers at the
points where they can supply markets at the least expense. It has not only sought markets
for its principal products, but for all possible by-products, sparing no expense in
introducing them to the public. It has not hesitated to invest millions of dollars in
methods of cheapening the gathering and distributions of oils by pipelines, special cars,
tank steamers, and tank wagons. …It has spared no expense in forcing its products into
the markets of the world among people civilized and uncivilized…”
The noted historian Alan Nevins made a thorough study of John D, Rockefeller’s career.
In his book, John D. Rockefeller: The Heroic Age of American Enterprise, Nevins
excused what he considered to be occasional questionable practices because be believed
that Rockefeller had to “use weapons and instruments of his time.” Nevins concluded that
Rockefeller’s motives were to “impose a more rational and efficient pattern” on the oil
industry. According to Nevins, Rockefeller was “an organizing genius” who “looms up as
one of the most impressive figures of the century,” and that those who objected to the
methods he used were not engaged in “a struggle against” wrongdoing, but a “struggle
against destiny.”
“it is plain that the place Rockefeller holds in American history is that of a great
innovator. His vision brought order to an industry bloated, lawless, and chaotic. Pursing
his vision, he devised a scheme of industrial organization which was magnificent.
Rockefeller…understood the real nature of economic forces, and the real motives
operative in American industry. He and other leaders…in American business
development were the guiding elite, in a modern sense, of our industrial society. Many of
the forces and elements in that society were irrational and wasteful. Rockefeller wished to
impose a more rational and efficient pattern, it is true that some of his methods were open
to criticism; but then it must be remembered that he had to use the weapons and
implements of his time.”
The title of Matthew Josephson’s book, The Robber Barons, reflected the author’s belief
that Rockefeller and other successful monopolists of their time were dishonest men who
cheated the public. Josephson found that Rockefeller’s “margin of profit” amounted to
“grotesques figures,” and he argued that Rockefeller’s control over industry was not the
result of superior efficiency but a result of the secret deals he made with the railroads and
a large number of other underhanded and illegal practices. He also believed that the socalled benefits to the consumer were but “accidental by-products” of an organization that
was clearly “out for the dollar.”
“The documents show that the independent oil dealer’s clients were menaced in every
way by the Standard Oil marketing agency; it threatened to open competing grocery
stores, to sell oats, meat, sugar, coffee at lower prices. ‘If you do not buy our oil we will
start a grocery store and sell goods at cost and put you out of business.’ By this means,
opponents in the country at large were soon ‘mopped up;’ small refiners and small
wholesalers who attempted to exploit a given district were routed at the appearance of the
familiar red-and-green tank wagons, which were equal to charging drastically reduced
rates for oil in one town, and twice as much in an adjacent town where the nuisance of
competition no longer existed. They found ways of effecting enormous economies and
always their profits mounted to grotesque figures. Though raw materials declined greatly
in value, and volume increased, the margin of profit was consistently controlled by the
monopoly; for the service of gathering and transporting oil, the price was not lowered in
twenty years, despite the superb technology possessed by the Standard Oil…” (Questions
E)
By the mid 1880s, Americans had become extremely aware that Standard Oil was not the
only monopoly. What had happened in the oil industry had also taken place in the
meatpacking business, copper, steel, whiskey, farm and shoe manufacturing machinery,
sugar refining, sewing machines, and other field too numerous to list. The practice of
unrestrained competition was leading to the elimination of competitors. In many
instances, the means used to destroy business rivals resembled the law of the jungle more
than the practice of civilized economic competition. It seemed to many people that only
those firms willing to exploit some special advantages with the railroads or use some
other strong-arm tactic were surviving while hones businessmen were quickly driven to
the wall and forced into bankruptcy. Gradually, the American people came to believe that
the government needed to put an end to the unrestrained competition that was allowing
crooked businessmen to form monopolies. As a result, Congress passed the Interstate
Commerce Act in 1887. The intent of this law was to prohibit particular unfair business
practices among the nation’s railroads. Included in the specific methods disallowed by
the Act were:
 receiving or providing secret rebates
 rate discrimination of any kind between shippers
 charging more for transporting goods for a short distance where there were no
competing railroads and less for the long haul when there was competition
 charging an unreasonable amount for services
Three years later, Congress passed the Sherman Antitrust Act. It was designed to
prohibit unfair competition among large firms. Rather than define specific illegal
practices (as the Commerce Act had), the Sherman Act contained much more ambiguous
language that made it difficult to decide exactly what was meant by the law. It said.
“Every contract, combination in the form of a trust or otherwise, or conspiracy in restraint
of trade or commerce, among the several States, or with foreign nations is hereby
declared to be illegal. Every person who shall monopolize, or attempt to monopolize any
of the trade or commerce among the several States, or with foreign nations, shall be
deemed guilty of a misdemeanor.” On several points, the Sherman Act was not very
specific. It left the courts to decide what a “conspiracy in restraint of trade” was, whether
manufacturing should be considered part of trade, and what actions would actually
constitute an “attempt to monopolize.”
The Sugar Refinery Case
Whether the Sherman Act would become an effective tool to curb the growth of giant
business enterprises was not velar at the time. Certainly success would in part be
determined by how vigorously the government prosecuted cases under the Act and how
the Supreme Court would interpret its meaning. These questions were soon answered in
the famous 1894 case U.S. v. E.C. Knight. The Supreme Court was asked to decide
whether the American Sugar Company’s purchase of four refineries in Philadelphia that
gave the company control over 98 percent of the nation’s sugar-refining capacity
represented a conspiracy in restraint of trade. The corporation defended itself in court by
arguing that control over manufacturing did not constitute a restraint of trade since there
was no necessary connection between manufacturing and commerce. With only one
dissenting opinion, the Court ruled: “The fact that an article is manufactured for export to
another state does not of itself make it an article of interstate commerce.” In fashioning
the Knight decision, the Supreme Court in effect vetoed the Sherman Act. The Attorney
General at the time was not upset that the outcome of this case deprived the national
government of the power to “deal with a matter that directly and injuriously affected the
entire commerce of the country.”
This combination of a reluctant administration and a pro-business Supreme Court
produced only 18 cases against business under the administration of three presidents:
Harrison, Cleveland, and McKinley. The government lost seven of the first eight.
Meanwhile, businessmen took advantage of the failure of prosecution under this law and
formed combinations at an increasingly rapid rate. Between 1880 and 1902, some 5000
small businesses were combined into 300 large corporations. Two-thirds of these
combinations were formed between 1898 and 1902-well after the Sherman Act was
passed. In his dissent on the Knight case, Justice John Marshall Harlan asked, “what
power is competent to protect the people of the United States against the monopolies
except a national one.” After Theodore Roosevelt succeeded William McKinley to the
White House in 1901, prosecution of big business under the Sherman Act was pursued in
earnest. Altogether, Theodore Roosevelt directed 44 different cases against monopolies.
The most famous was the suit instituted against Standard Oil Company in 1906.
United States v. Standard Oil
By the time Standard Oil was brought to court, the Knight decision had been reversedmanufacturing was no longer considered an “accidental, secondary, remote or merely
probable” relationship to commerce- and the Supreme Court had once again asserted its
right to regulate trade in the U.S. Under the direction of its chief prosecutor, Frank B.
Kellogg, the government’s case soon took shape. The government claimed that the
Standard Oil Company had obtained its monopoly “not by superior efficiency, but by
unfair and immoral acts-rebate taking, local price-cutting” and so forth, in defiance of
local and federal laws. What savings the company could claim in its efficient operations,
the government argued, were not passed on to the consumer, but taken by the few men
who controlled the oil industry to make themselves millionaires many times over at the
public’s expense. Standard’s defense was handled by a team of distinguished lawyers
under the supervision of John C. Milburn. They emphasized the extraordinary efficiency
of the company, its tremendous constructive achievement in producing an excellent
product for a very reasonable price, and meeting the need for kerosene, gasoline, and
many different kinds of lubricants. The defense stressed the many innovations in refining
and in transporting oil that were developed by Standard as well as many useful byproducts. Its alleged unfair competitive practices were necessary to insure its survival in
the business climate of that time. They should be dismissed as “mere incidents in the
conduct of a great business” and due to the “over zealousness of some employees” rather
than the intent of the corporation’s directors.”
On May 15, 1911, Chief Justice Edward White announced the Court’s decision in the
case. By an 8-1 vote, they ruled that: “The combination and conspiracy in restraint of
trade and its continued execution which have been found to exist, constitute illegal means
by which the conspiring defendants combined, and still combine and conspire to
monopolize a part of interstate and international commerce”
In addition to creating a monopoly, Standard Oil had fixed prices, destroyed competition,
and held back production. Its punishment was to be split into 34 corporations. Each
stockholder in Standard Oil was awarded shares in the 34 corporations in proportion to
the number of stocks he or she owned in Standard. Rockefeller, who had owned onefourth of the shares in Standard, now owned 25 percent of the shares of the 33 companies
that once were subsidiaries of Standard. Together with his closest partners, Rockefeller
now owned the majority of the shares in all of these corporations. The value of his shares
within two years after the decision had increased from $300 million to $900 million and
made him the richest man in the world. Competition between the 33 corporations that
broke off from Standard Oil was minimal. The old boys who had worked with
Rockefeller met regularly in his office to “share ideas.” For years, all of the subsidiaries
stayed within 11 districts and did not compete with one another. As years went by, the
discovery of new oil fields and the new uses for oil (gasoline, aviation gas, petroleum
products) allowed new companies to rise. These included Sunoco, Texaco, Gulf, Getty,
and many others. Yet 75 years after the breakup, the good ship Rockefeller and its
descendants were among the largest vessels floating on a sea of oil.
The suit against Stand Oil was one of the most dramatic tests of strength in the courts of
that era because it pitted the U.S. government against the nation’s largest corporation and
its wealthiest citizen. It was both a test of strength and of philosophies-the strength of
private enterprise as opposed to public regulation, and the philosophies of Laissez-faire
and survival of the fittest, as opposed to the belief in control by the federal government.
(Questions F)
How the Other Half Worked and Lived
During America’s industrial era, businessmen like John D, Rockefeller made millions
with their oil refineries, and the country as a whole increased its overall production.
However, good times did not always trickle down to those who actually did the work.
One of the hardest and most dangerous jobs in the U.S. was mining coal. Often forced to
work in the mines as children, miners usually spent the rest of their working lives in
dangerous, dark, and damp holes far below the earth’s surface. One miner wrote, “I’m
twelve years old, goin’ on thirteen,” said the boy to the boss of the breaker. He didn’t
look more than ten…but the law said he must be twelve to get a job. He was one…of the
16,000 kids in the mines, who…start in the breaker before many boys have passed their
primary schooling…He gets from fifty to seventy cents for ten hours’ work. He rises at
5:30 in the morning, puts on his working clothes, always soaked with dust, eats his
breakfast, and by 7 am he has climbed the dark and dusty stairway to the screen room
where he works. He sits on a hard bench built across a long chute through which passes a
steady stream of broken coal. From the coal he must pick the pieces of slate or rock.
Sitting on his uncomfortable seat, bending constantly over the passing stream of coal, his
hands soon become cut and scarred by the sharp pieces of slate and coal, while his
fingernails are soon worn to the quick from contact with the iron chute. The air he
breathes is saturated with the coal dust, and as a rule the breaker is hot in summer and
cold in winter. The miner rises at 5 am; he enters the mine shortly after 6. In some cases
he has to walk a mile or more underground to reach his place of work. He spends from 810 hours in the mine and is paid about $1.60 a day. His dangers are many. He may be
crushed to death at any time by the falling roof, burned to death by exploding gas, or
blown to pieces by a premature blast…In no part of the country will you find so many
crippled boys and broken down men. During the last 30 years over 10,000 men and boys
have been killed and 25,000 have been injured in this industry. Not many old men are
found in the mines. The average age of those killed is 32. It is an endless routine of dull
plodding world from 9 years until death-a sort of voluntary life imprisonment. Few
escape. Once they begin, they continue to live out their commonplace, low leveled
existence, ignoring their daily danger, knowing nothing better.”
Jacob Riis
Riss, an immigrant from Denmark, was also a social reformer. A police reporter and
photographer, he shocked the wealthy and comfortable in New York City with his
pictures and hard-hitting descriptions of how the other half lived in the city’s alleys and
tenement houses. He wrote, “Here where the hall turns and dives into utter darkness is a
step, and another, another. A flight of stairs. You can feel your way, if you cannot see it.
All the fresh air that ever enters these stairs comes from the hall-door that is forever
slamming, and from windows of dark bedrooms that in turn receive from the stairs their
sole supply of the elements God meant to be free, but man deals out with such a sparse
hand. That was a woman filling her pail by the hydrant you just bumped against. The
sinks are in the hallway, that all the tenants may have access-and all the tenants be
poisoned alike by their summer stenches. Hear the pump squeak! It is the lullaby of
tenement-house babes. A child is dying of measles. With half a chance it might have
lived; but it had none.”
Meatpacking in Illinois
The horrors of working in a meatpacking plant were revealed to a shocked nation in 1906
by Upton Sinclair’s novel, The Jungle. A Congressional committee investigating the
plants around Chicago reached the conclusion that Sinclair did not exaggerate. Sinclair
said, “There were the men in the pickle rooms; scarce a one of these that had not some
spot of horror on his person. Let a man so much as scrape his finger pushing a truck in
the pickle rooms and he might have a sore that would put him out of the world; all his
joints in his fingers might be eaten by the acid, one by one. Of the butchers and
floorsmen, the beef-boners and trimmers, and all those who used knives, you could
scarcely find a person who had the use of his thumb; time and time again the base of it
had been slashed, till it was a mere lump of flesh against which a man pressed the knife
to hold it. They would have no nails,-they had worn them off pulling hides; their
knuckles were swollen so that their fingers spread out like a fan. There were men who
worked in the cooking rooms, in the midst of steam and sickening odors, by artificial
light; in these rooms the germs of tuberculosis might live for two years, but the supply
was renewed every hour. There were beef-luggers, who carried two-hundred-pound
quarters into the refrigerator-cars; a fearful kind of work, than began at 4 am, and that
wore out the most powerful men in a few years. There were those who worked in the
chilling rooms, and whose special disease was rheumatism; the time limit that a man
could work in the chilling rooms was said to be f years. There were the wool-pluckers,
whose hands went to pieces even sooner than the hands of the pickle men; for the pelts of
the sheep had to be painted with acid to loosen the wool, and then the pluckers had to pull
out the wool with their bare hands, till the acid had eaten their fingers off… Worst of any,
however…was in the cooking rooms…the other men, who worked in tank rooms full of
steam, and in some of which there were open vats near the level of the floor, their
peculiar trouble was that they fell into the vats; and when they were fished out, there
were never enough of them left worth exhibiting.-sometimes they would be overlooked
for days, till all but the bones of them had gone out to the world as Durham’s Pure Leaf
Lard.”
A famous historian, Charles A. Beard collected anecdotes about the most outrageous
spending of the super-rich during the same period that Riis was writing about life in New
York City slums. “At a dinner eaten on horseback, the favorite steed was fed flowers and
champagne; to a small black and tan dog wearing a diamond collar worth $15,000 a
lavish banquet was tendered; at one function the cigarettes were wrapped in hundreddollar bills; at another, fine black pearls were given to the diners in their oysters.
Diamonds set in teeth; a private carriage and personal valet were provided for a pet
monkey…a necklace costing $600,000 was purchased for a young daughter of a
dignitary…an entire theatrical company was taken from New York to Chicago to
entertain the friend of a magnate and a complete orchestra engaged to serenade a newborn child.” (Questions G)
Eugene Debs and the Pullman Strike
George Pullman became a multimillionaire because he had a single idea and the practical
genius to perfect it. His inspiration came from knowing that railroad passengers traveling
long distances would not want to spend restless nights sitting upright on uncomfortable
seats. His idea was to provide what became known as the Pullman sleeping car. Wealthy
passengers’ daytime coaches could be converted into a two-bunk bedroom at night, and
they could arrive at their destinations well rested from the benefit of a good night’s sleep.
On the wings of this insight, Pullman expanded his Palace Car Company into a large
corporation. He made a fortune of $25 million and employed more than 5000 workers.
Not satisfied with making a fortune as a successful entrepreneur, Pullman sought to gain
the reputation of a philanthropist. He build what he advertised as a model town for his
workmen, complete with a church, a library, playing fields, and a private lake. However,
the rents that he charged were 20 percent higher than similar dwellings in surrounding
towns, his workers were pressured to live in Pullman Town, and he expected to make a
profit from the rents he charged employees.
At the age of 15, Eugene Debs worked at nights for the local railroad and attended school
by day. At 18, Debs became the secretary of the Local Brotherhood of Railroad Workers.
He did his best to build an organization that would protect the rights of all railroad
workers, not just those with special skills. His American Railroad Workers Union won a
major strike in 1894 by reversing a 25-cents a day wage cut for unskilled workers. That
same year, his 150,000-man union was asked to support a group of Pullman workers who
were fired for protesting a 25 percent wage cut. This set the stage for one of the most
famous battles between labor and management in American history. Before the Pullman
strike was over, 12 men were dead, $500,000 worth of property was destroyed, and 24
railroads coming in and out of Chicago were shut down. Debs was blamed for the strike
and charged with violating the Sherman Antitrust Act, inciting a riot, and interfering with
the U.S. mail.
A terrible depression-the worst in its history-hit the U.S. in 1893. Orders for the luxury
sleeper and other railroad cars made at Pullman were reduced. Pullman cut wages by 25
percent, and during a ten-month period, 2200 workers were laid off. During that same
period, however, he increased payments to stockholders to $2,520,000. Although times
were tough for workers in Pullman Town during the winter of 1893-94, Pullman would
not reduce rents in his model community. Wages were paid only after rent was deducted
and these deductions reduced some workers’ biweekly payments to fewer than seven
cents. Pullman claimed to have taken orders for railroad cars that paid less than his cost
of producing them. However, he also claimed that he was not responsible for paying his
workers a living wage or paying them at all while he had no work for them. He told his
dissatisfied and unemployed workers to find jobs somewhere else. Many of Pullman’s
workers joined the newly formed American Railroad Union. Union members asked to
talk to Pullman to protest the cuts in their wages. Pullman invited 43 of them to come in
and see him. They told Pullman that they could not feed their families, and asked him to
either increase their pay or decrease their rents. Pullman told them that he had no more
need for their services and fired three of the men on the grievance committee. The others
quit in protest.
At first, Eugene Debs did not want to support the Pullman workers. He was afraid that his
new union would lose in a test of strength with the powerful and well-financed Pullman
Company. He asked Pullman to rehire the fired workers, restore wage cuts, and bargain
with dissatisfied workers, or allow a neutral party to arbitrate their dispute. Pullman said
he would allow any worker who had a complaint to come and see him as an individual
but there was nothing to arbitrate. Pullman believed that the company was his to run as he
saw fit, and no one else had a right to tell him how to manage his business. After learning
that Pullman had refused to meet his workers’ demands, Debs decided to come to their
aid. Since Pullman made much of his money by renting his luxury sleeper cars to the
railroads, Debs ordered workers not to handle trains with Pullman cars attached to them.
The managers of the 24 railroads passing through Chicago had formed an organization
called the Railroad Managers Association. A successful strike against Pullman would
make the union stronger and lead to workers making demands on them. The union might
end up striking to raise the wages of all railroad workers. For these reasons, the managers
decided to help Pullman break the strike. The strike began at noon on June 26, 1894,
when Debs ordered American Railroad Union (ARU) members to separate all sleeping
cars from the trains pulling them. The Railroad Managers Association responded by
ordering mail and Pullman cars connected to the same trains. The workers who did not
obey these orders were fired. To support the fired railroad workers, other ARU members
quit. Within three days, 125,000 men were fired and/or stopped working. The railroad
managers began looking for men to replace the missing workers.
Before July 5th, there was little violence, and less than $6000 worth of damage done to
property. Nevertheless, 24 railroads leading in and out of Chicago were immobilized and
125,000 railroad men and women were out of work. In spite of this, Governor John
Altgeld of Illinois thought that he had the situation well in hand. However, President
Grover Cleveland read exaggerated accounts from local newspapers, and his advisors told
him that it was time for the federal government to do something. The president told the
Attorney General Richard Olney to get a federal court to order the American Railroad
Union to stop the strike. The Sherman Antitrust Act stated that “every contract,
combination in the form of trust or otherwise in restraint of trade or commerce among the
states” was illegal. Even though the Sherman Act was passed to stop big business from
forming monopolies, the judge decided that by refusing to handle Pullman cars, the union
was restraining trade. Governor Altgeld continued to believe that there was no need for
federal troops. Illinois Judge Peter Grosscup contradicted his stand on this question.
Grosscup telegraphed Attorney General Olney with the claim that soldiers were needed to
keep order and to prevent the destruction of property. He consulted with President
Cleveland and the two decided to rush federal troops under General Nelson Miles to
Chicago. Meanwhile, Governor Altgeld claimed that state troopers and city police had the
situation under control. The soldiers arrived in Chicago and joined 5000 deputized
federal marshals picked by the railroad association, more than 3000 police, and a large
number of state militia.
The court order put Debs in a difficult position. If he obeyed the order and ended the
strike, the workers would lose; if he refused to obey, he and other leaders of the strike
would be arrested. Debs decided to continue the strike, but to do his bst to avoid violence.
He sent telegrams all over the country telling workers to keep striking but to avoid using
force to stop the trains. Debs also repeated his earlier call for impartial arbitration of the
strike with no conditions except that the fired workers get rehired. The General
Manager’s Association supported Pullman’s refusal to meet with Debs or union officials.
In one speech, Debs allegedly repudiated his calls for nonviolence and said. “They have
answered our call for arbitration with iron and steel. Now is the time for muscle and
blood, not compromise. Federal troops arrived in Chicago shortly after the “muscle and
blood” statement. Thinking that the troops would allow strikebreakers to take jobs from
striking workers, angry mobs set fire to a row of railroad cars. A strong wind fanned the
blaze and destroyed 700 railroad cars. Total damage for the day amounted to $340,000
compared to the $6000 in damages before the troops arrived. Later, the government
claimed the violence proved that the troops were needed to prevent the riots that followed
their arrival. Debs was charged with inciting violence, disobeying a legal court order,
interfering with the mail, and violating the Sherman Antitrust Act. (Questions H)
Labor vs. Management
In the most extreme form, the views of management were expressed by George F. Baer,
president of the coal mine that owned the Reading Railroad, when he was confronted
with a strike by coal workers: “The rights and interests of the laboring man will be
protected and cared for, not by the labor agitators, but by the Christian men to whom God
in His infinite wisdom had given control of the property interests of the country.”
Management claimed that the people who owned the business had a right to make
decisions for the business, and, in the words of General Motors’ president Charles
Wilson, “What is good for General Motors is good for America.” In other words,
management based its arguments on the belief that prosperity trickles down from
businesses to the workingman and the rest of the country. President John F. Kennedy
expressed this ides when responding to criticism that his tax cut would benefit only
wealthy Americans: he replied, “A rising tide lifts all boats.” Basically, management
wants a free hand to make all decisions that will benefit the company. If wages are too
high, businesses cannot make profits. Profits get reinvested to increase production.
Increased production makes it possible to hire more workers and to produce more goods
for customers. If management loses money and the firm goes out of business consumers,
workers, and management suffer.
In his famous speech before his party’s convention, presidential candidate William
Jennings Bryan declared: “There are two ideas of government. There are those who
believe that if you just legislate to make the well-to-do prosperous, that their prosperity
will leak through on those below. The Democratic idea has been that if you legislate to
make the masses prosperous their prosperity will find its way up and through every class
that rests upon it.” The logic behind Bryan’s assertion runs as follows: The majority of
the people in the United States are workers, not businessmen. Workers need to feed and
clothe their families. If workers prosper, they will be able to buy more products that
businesses produce. While running for office, President Barack Obama expressed this
idea when answering a question posed by a man planning to buy a plumbing business, “If
you’ve got a plumbing business, you’re going to be better off if you’ve got a whole
bunch of customers who can afford to hire you.” Customers help provide a market: more
customers allow businesses to increase sales, earn more money, expand production, and
gain more profits. As the famous leader Walter Reuther once told automobile maker
Henry Ford: improved machinery may be able to help Ford make cars, but he still needs
people to buy them.
Labor vs. Management: Two Modern Views:
From Russ Nelson, “The Unions are for Unions,” Forbes.com, May 24, 2004: One of the
functions of a union is to monopolize labor. To the extent that they actually succeed in
doing so, unions are bad for society in the same way that any monopoly is bad for
society. In case you haven’t been following along on the play-by-play, it’s because a
monopoly can charge monopoly prices. A monopoly gets monopoly prices by restricting
the amount of production so as to move the price point to a more profitable position. You
can see, now, why unions are always threatening a strike…
From “Measure Would Counter Wal-Mart’s Union-Busting Tactics,” tucsoncitizen.com:
Without union representation, the working person is at the mercy of the employee. A
single employee cannot bargain effectively on their own behalf. They are eminently
replicable, with a long line of people waint to take their place. This is just as the company
would have it. With a strong union representing the majority of employees, the company
is forced to bargain over wages and benefits.
In their conflict over wages and working conditions, labor and management have
developed tactics to further their causes. You read about some of these tactics in the
battle between the Pullman Palace Car Company and the American Railroad Union.
Management Tactics: A key issue between workers and management is union
recognition and collective bargaining. Workers want to have their representatives able to
talk to and bargain with management over pay and working conditions as well as
retirement benefits. Managers prefer to deal with workers as individuals and not as a
group. As long as workers are not organized, they have no power to effect change, and
management can make all the decisions regarding labor. In the Pullman Strike, you were
made aware of the workers’ committee of 43 who talked with George Pullman about
layoffs and cuts in wages. Pullman listened to their complaints and then fired three
members of the committee. He, in effect, refused to recognize a right to collective
bargaining. Many managers were willing to do whatever they could get away with in
order to stop workers from forming unions and to avoid bargaining with them I good
faith. Among these tactics were the following:
 Yellow dog contract: Forcing workers to sign a contract not to join a union
 Blacklist: Circulating the names of persons who were union organizers or
“troublemakers” so they would not be hired by anyone else

Finks: Also called labor spies; often known today as “snitches.” They are people
hired to pretend they are employees and tell management what they know about
union activities.
 Company Unions: Managers might organize a union that is under their control to
prevent workers from forming a more radical union of their own.
 Refusing binding arbitration: Arbitration refers to a neutral third party who
settles a dispute after listening to both sides. Generally, managers refuse
arbitration because they do not want others to make decision that might hurt their
business.
 Injunctions: Management had often succeeded in getting court orders to have
unions stop striking. Government during the 19th century had a habit of siding
with management during labor disputes.
Strikes and Secondary Boycotts: Union Tactics: The most powerful weapon in workers’
arsenals is to withhold their labor-in other words, to strike. A strike or the mere threat of
a strike is the power that calls management’s attention to workers’ demands. The Pullman
workers never actually went on strike, but Eugene Debs came to their aid by directing
members of his railroad workers union to boycott (not handle) Pullman cars. This is
called a secondary boycott. It is an action committed by a party not directly involved in a
labor conflict to help the strikers by boycotting management’s operations. During strikes
and secondary boycotts, workers and managers have used various tactics to win. Workers
will place pickets around the firm being struck to prevent anyone from assisting
management. At all costs, workers try to prevent managers from hiring strikebreakers.
Strikebreakers-or “scabs,” as workers call them-will take jobs at a place where workers
are on strike, and hiring them is a favorite tactic of management. One of the reasons for
violence when federal troops arrived in Chicago was because workers were afraid that the
troops would allow scabs to take their place on the railroads.
Both workers and managers try to get public opinion on their aide. In this struggle,
management usually has the upper hand. Strikes, like the Pullman strike, cause great
difficulties for the public. Management did its best during the Pullman strike to blame
Debs and his ARU for the disturbances caused by their secondary boycott. Usually, the
strikers are blamed rather than management, who may have actually caused the strike to
take place. Managers like to call for assistance from the government (federal and state) to
break up strikes. They succeeded in the case of the Pullman strike. A court order (an
injunction) was issued ordering Debs to call off his boycott of trains pulling Pullman
cars. The government had intervened in favor of management, arrested Debs, and ended
the strike. It wasn’t until the 20th century that workers could organize successfully. Once
they managed to get unions recognized as collective bargaining agents, they too
developed tactics that increased their power:
 Sit down strike: During the 1930s, workers developed the technique of staying in
factories and not working until management recognized their union. This
technique worked because management could not hire scabs and did not want to
risk damage to machinery by having police remove workers from the factory they
occupied.
 Closed Shop: Unions want management to hire only workers who are already
union members.

Union Shop: Unions want all workers in a factory to be dues-paying members of
the union. The dues give unions money with which to support workers who are on
strike, and full union membership supports worker solidarity. (Chart I)
Other strikes during this period:
 The Railroad Strike of 1877
 The Homestead Strike of 1892
 The Steel Strike of 1919